Secondary bond market activity remains muted

• Rs. 160 b Treasury bill auction in focus

By Wealth Trust Securities

The secondary bond market continued to remain subdued, with market participants mostly adopting a wait and see approach. Few trades were observed on thin overall transaction volumes, with the market remaining at a standstill for much of the day and yields continued to increase on the back of bearish sentiment. Yields were observed recovering slightly on the longer tenor bonds, albeit still at elevated levels.

Accordingly, the 01.08.26 maturity was seen transacting at the rate of 11.00%. Additionally, the 15.09.29 maturity was seen trading within the range of 12.16% to 12.11%. The 15.05.30, 01.12.31 and 01.07.32 maturities were seen trading within the range of 12.17% to 12.13%, collectively.

The Treasury bill auction scheduled for today will offer a total volume of Rs. 160.00 billion, a reduction of Rs. 70.00 billion from the previous week. This will consist of Rs. 40.00 billion on the 91-day maturity, Rs. 80.00 billion on the 182-day and Rs. 40.00 billion on the 364-day maturities.

For context, at last Wednesday’s Treasury bill auction (19/06/24), yields increased for a third week, with rates moving up across all tenors. The 91-day maturity yield rose by 50 basis points to 9.39%, the 182-day maturity by 51 basis points to 9.89%, and the 364-day maturity by 36 basis points to 9.90%. The entire offered amount of Rs 230 billion was successfully taken up during the auction’s first phase, marking the third consecutive round of auctions exceeding Rs. 200 billion. The majority or 81% of the accepted amount was raised through the 91-day and 182-day maturities.

The total secondary market Treasury bond/bill transacted volume for 24 June was Rs. 18.26 billion.

In money markets, the weighted average rate on overnight call money was at 8.72% and repo was at 9.03%.

The net liquidity surplus stood at Rs. 67.34 billion yesterday as an amount of Rs. 11.40 billion was withdrawn from Central Banks SLFR (Standard Lending Facility Rate) of 9.50% against an amount of Rs. 139.59 billion been deposited at Central Banks SDFR (Standard Deposit Facility Rate) of 8.50%. 

Further, the DOD (Domestic Operations Department) of Central Bank injected liquidity by way of overnight and 7-day term reverse repo auction for Rs. 20.85 billion and Rs. 40.00 billion at the weighted average rates of 8.69% and 8.97% respectively.

Forex Market 

In the Forex market, the USD/LKR rate on spot contracts closed the day stable, at Rs. 305.20/305.35 against its previous day’s closing level of Rs.305.20/305.30.

 The total USD/LKR traded volume for 24 June was 

$ 62.75 million.

(References: Central Bank of Sri Lanka, Bloomberg E-Bond trading platform, Money broking companies)